The Chinese central bank has to circumvent offshore imports-driven inflation due to Renminbi currency misalignment.

Amy Hamilton

2019-07-07 18:36:00 Sun ET

The Chinese central bank has to circumvent offshore imports-driven inflation due to Renminbi currency misalignment. Even though China keeps substantial foreign reserves in U.S. government bonds, traders may still speculate whether the People Bank of China (PBOC) can fix the Dollar-Renminbi exchange rate below 7.0x. This current exchange rate has substantially declined about 9.3% since April 2018 and now hovers in the stable range of 6.89x-6.92x. PBOC Governor Yi Gang indicates that there is no asymmetric red line for the Sino-American exchange rate. However, Chinese economic policymakers may be hesitant to let their currency depreciate past RMB$7-to-USD$1.

Any expectations of short-term currency misalignment can spur capital flight out of the Chinese economy. Chinese public corporations that list abroad have to make cash dividend payments in June each year; so foreign exchange order flows reveal substantive short-term pressure for these Chinese public firms to sell the offshore Renminbi. As China achieves a near-zero current account surplus in mid-2019, the Renminbi faces downward pressure. Renminbi depreciation has long been a major source of tremendous competitive advantage for China. It is important for the Sino-U.S. trade negotiations to level the playing field with respect to potential Renminbi currency misalignment.

 


If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.

Blog+More

Capital market liberalization and globalization connect global financial markets to allow an ocean of money to flow through them.

Becky Berkman

2018-06-17 10:35:00 Sunday ET

Capital market liberalization and globalization connect global financial markets to allow an ocean of money to flow through them.

In the past decades, capital market liberalization and globalization have combined to connect global financial markets to allow an ocean of money to flow th

+See More

Gold prices surge above $1400 per ounce amid global trade tension and economic policy uncertainty.

Charlene Vos

2019-07-17 12:37:00 Wednesday ET

Gold prices surge above $1400 per ounce amid global trade tension and economic policy uncertainty.

Gold prices surge above $1400 per ounce amid global trade tension and economic policy uncertainty. Both European Central Bank and Bank of Japan may consider

+See More

Bank of England publishes its latest insights into the economic impact of Brexit on British real productivity, capital investment, and labor supply.

Olivia London

2018-12-03 10:40:00 Monday ET

Bank of England publishes its latest insights into the economic impact of Brexit on British real productivity, capital investment, and labor supply.

Bank of England publishes its latest insights into the economic impact of Brexit on British real productivity, capital investment, and labor supply as of 20

+See More

President Trump unveils his ambitious $1.5 trillion public infrastructure plan.

Daisy Harvey

2018-02-11 07:30:00 Sunday ET

President Trump unveils his ambitious $1.5 trillion public infrastructure plan.

President Trump unveils his ambitious $1.5 trillion public infrastructure plan. Trump proposes offering $100 billion in federal incentives to encourage stat

+See More

CNBC's business anchorwoman Becky Quick interviews Nobel Laureate Joseph Stiglitz on the current Sino-U.S. trade war.

Daisy Harvey

2018-03-27 07:33:00 Tuesday ET

CNBC's business anchorwoman Becky Quick interviews Nobel Laureate Joseph Stiglitz on the current Sino-U.S. trade war.

CNBC's business anchorwoman Becky Quick interviews Nobel Laureate Joseph Stiglitz on the current trade war between America and China. As America imposes

+See More

Harvard financial economist Alberto Cavallo empirically shows the recent *Amazon effect* of faster retail price adjustments.

Amy Hamilton

2018-08-23 11:34:00 Thursday ET

Harvard financial economist Alberto Cavallo empirically shows the recent *Amazon effect* of faster retail price adjustments.

Harvard financial economist Alberto Cavallo empirically shows the recent *Amazon effect* that online retailers such as Amazon, Alibaba, and eBay etc use fas

+See More